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By Likha C. Cuevas-Miel, Reporter
SHARE prices of local companies tumbled Tuesday
to a 21-month low on fears that continuous oil price hikes,
double-digit inflation and a slowing economy may hurt corporate
earnings, analysts said.
The 30-company Philippine Stock Exchange index (PSEi)—the
barometer for stock price movements—fell by 1.82 percent or 44.73
points to 2,415.25 while the broader all-share index dropped 1.695
percent or 26.64 points to 1,545.04.
According to the PSE, Tuesday’s close was the
lowest after it ended at 2,406.48 points on September 14, 2006.
Total volume traded reached 1.418 billion shares
worth P3.67 billion. Losers beat gainers 88 to 14 while shares of 39
companies were unchanged.
James Lago of PCCI Securities Brokers Corp. said
investors were spooked by the pronouncement of the Bangko Sentral ng
Pilipinas (BSP) that inflation last month hovered between 10.4
percent and 11.2 percent on the back of surging world oil prices,
which hit a fresh record of $143 per barrel on Monday night. Soaring
oil prices have caused domestic pump prices to climb, triggering
wage and cost of living allowance adjustments.
Moreover, increases in the prices of rice,
fruits and vegetables bolstered the central bank’s expectations of
higher inflation last month.
Lago pegged the PSEi’s support level after
Tuesday’s fall at between 2,380 and 2,400.
Ron Rodrigo, DBP-Daiwa Securities head of
research, said inflation would drag down the economy, propelling
companies to “cut their gains” while the volatility in oil
prices would make it hard for firms to set their internal targets.
Grace Cerdenia, 2Trade Asia head of research,
said investors are more concerned about the effect of inflation on
key interest rates, as the market expects the BSP will further
tighten monetary policy by 25 to 50 basis points on July 17.
“Market reaction was expected as worldwide
fund managers have accepted that interest rates have already
bottomed out,” Cerdenia said.
With this scenario, companies—especially
conglomerates—have become more cautious in terms of their
expansion and financing plans. Some are opting for “the
optimization of their internal cash” rather than other modes of
fund raising, she added.
Some firms have already revised their revenue
and profit forecasts in light of more expensive inputs and
consumers’ dwindling purchasing power. Banks have also hinted at
tighter interest spreads, which would propel them to seek other
measures to keep their profits from being squeezed further by
streamlining operations.
“Regionally, we’re in the same boat.
Inflation is a contagion that other markets have to contend with,”
Cerdenia said.
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